OUTSOURCING OF BULK WATER SERVICES. Stephen Muller Director: Infrastructure and Planning 7 March 2016

Transcription

1 OUTSOURCING OF BULK WATER SERVICES Stephen Muller Director: Infrastructure and Planning 7 March 2016

2 Overstrand Municipality 11 towns Buffelsriver Rooi WTW Els Pringle Bay Betty s Bay Kleinmond Kleinmond WTW WWTW Hawston WWTW Hermanus WWTW Greater Preekstoel Hermanus WTW Preekstoel Bio WTW 230km of coast line Stanford Stanford WTW Stanford WWTW Greater Gansbaai De Kelders RO WTW Franskraal WTW Gansbaai WWTW Baardskeerdersbos Baardskeerdersbos UF WTW Baardskeerdersbos Pearly Beach Pearly Beach UF WTW Wolvengat/ Viljoenshof 2 2 Buffeljagsbaai Buffeljagsbaai WTW

3 Background Overstrand Municipality completed major bulk infrastructure upgrades over the preceding 5 years Approximately R1b was spent on capital projects from 2006 to 2011 Total water treatment capacity was upgraded from 43 Ml/d to 59 Ml/d (38 % increase), including 4 new plants Total sewage treatment capacity was upgraded from 13 Ml/day to 18 Ml/day (40 % increase) 3

4 Background New technologies were deployed, e.g. Nereda, Reverse Osmosis, Ultra Filtration and Bio-filtration of Iron and Manganese from Groundwater Additional skilled personnel are required to operate the plants and the new technologies - Regulations 2834 and 17 Limited budgets for maintenance 4

5 5 Gansbaai NEREDA WWTW

6 6 New Franskraal WTW

7 De Kelders RO WTW 7

8 8 B Bos Ultra Filtration WTW

9 9 Preekstoel Biological WTW

10 Background Water Sources 5 Dams and 1 river abstraction 17 Boreholes and 3 Springs Bulk Water Infrastructure 9 Treatment Plants 44 Reservoirs 19 Pump Stations 78km bulk pipelines Bulk Waste Water Infrastructure 5 Treatment Plants 36 Pump Stations 45km bulk pipelines 10

11 MUNICIPAL SYSTEMS ACT CHAPTER 8: MUNICIPAL SERVICES 73. General duty Part 1: Service tariffs 74. Tariff policy 75. By-laws to give effect to policy. Part 2: Provision of services 76. Mechanisms for provision of services 77. Occasions when municipalities must review and decide on mechanisms to provide municipal services 78. Criteria and process for deciding on mechanisms to provide municipal services 11

12 MSA Section 78 process 76. Mechanisms for provision of services. A municipality may provide a municipal service in its area or a part of its area through (a) (b) an internal mechanism, ; or an external mechanism 12

13 MSA Section 78 process 77. Occasions when municipalities must review and decide on mechanisms to provide municipal services. A municipality must review and decide on the appropriate mechanism to provide a municipal service when (c) an existing municipal service is to be significantly upgraded, extended or improved; 13

14 MSA Section 78 process On 28 June 2011, Council resolved (ito MSA s77) to review its current water services delivery mechanism due to the substantial investments made in water and sewerage infrastructure. Worley Parsons was appointed as the transaction advisors They assembled a team of technical, legal, HR and financial experts 14

15 MSA Section 78 process 78. Criteria and process for deciding on mechanisms to provide municipal services. (1) When a municipality has in terms of section 77 decided to review any existing mechanism (a) it must first assess (i) the direct and indirect costs and benefits associated with the project if the service is provided by an internal mechanism, (ii) the municipality s capacity and potential future capacity for the provision of the service through an internal mechanism ; 15

16 MSA Section 78 process (iii) the extent to which the re-organisation and the development of the human resource capacity within that administration could be utilised to provide a service through an internal mechanism ; (iv) the likely impact on development, job creation and employment patterns in the municipality, and (v) the views of organised labour; and (b) it may take into account any developing trends in the sustainable provision of municipal services generally. 16

17 S78(1) Investigation outcome The development and expansion of internal capacity has not kept up with the expansion of infrastructure and advancements in new technology, accordingly staff finds it difficult to operate and maintain the infrastructure and does not necessarily have the skills to operate the infrastructure optimally There is a shortage of qualified Process Controllers at the WTWs and WWTWs Supply Chain Management frustrates the processes and operations from time to time 17

18 S78(1) Investigation outcome In some instance personnel are not performing their duties and disciplinary actions are not producing the required results Large amounts of overtime is being spent, this is further complicated by lack of skills to operate efficiently There is a concern that assets and resources are not used optimally including human resources, chemicals and electricity There is limited pro-active maintenance currently, and There is a concern that the municipal bulk water assets are not adequately operated, maintained and preserved. 18

19 S78(1) Investigation findings OM has day-to-day operational challenges, but has the capacity to continue rendering water services by way of an internal mechanism. Key challenge is acquiring and retaining the skills and expertise to operate the bulk services sustainably over the longer term. Concluded that an internal WSP support contract will best address the specific needs of the Municipality. 19

20 Section 78(1) Investigation Report discussed with and circulated to organized labour for comments for a period of 2 months Council resolved in January 2014, ito s78(2), that the internal mechanism be retained, but that a suitably qualified and experienced operator be contracted to operate and maintain the bulk infrastructure Note: s77 decision was in June

21 Two stage process: Procurement Process 1 st stage = Request for Qualification (RfQ) 2 nd stage = Request for Proposals (RfP) Aug 2014: RfQ was issued: No pricing involved at his stage Purely points for company relevant experience and expertise, staff qualifications and relevant experience, company management systems, company financial position 21

22 Procurement Process Sept 2014: 8 submissions were received Dec 2014: 4 short listed bidders were issued with the RfP documentation Jan 2015: 3 proposals were received Veolia R22.0m/a WSSA R26.3m/a Bosch Munitech R54.8m/a Sembcorp Withdrew from 2 nd phase 22

23 Procurement Process March 2015: Bid Committees (BEC and BAC) identified the Preferred Bidder and the Reserve Preferred Bidder March 2015: Municipal Manager (MM) announced the Preferred Bidder (Veolia) and Reserve Preferred Bidder (WSSA) March to July 2015: Final Contract negotiated with the Preferred Bidder July 2015: BAC recommendation final award to MM July 2015: MM awarded the contract 23

24 MFMA Section 33 Process Contracts exceeding 3 years have to be approved by Council in its final form, after considering: The long term financial implications of the contract The impact of the proposed contract on future tariffs The views of National and Provincial Treasuries and the relevant sector departments (DLG and DWS) The views of the public Views to be solicited at least 60 days before Council meeting 24

25 MFMA Section 33 Process Council has to ascertain that it will secure a significant financial economical benefit from the contract Council has to authorise the MM to sign the contract Final report served before Council and was approved on 29 July

26 Consultation Organised Labour [MSA s.78(1)] Views of organised labour solicited during MSA s.78(1) August to October 2011 LLF Working group with SAMWU, IMATU and OM established to deal with implementation of Council resolution 26

27 Consultation NT, PT, DLG and DWS [MFMA s.33] Advised of outcome of Council s decision and proposed approach in June Meetings were held with National and Provincial Treasury on 3 July 2014 and PT on 19 March 2015 Formal submission received only from PT - supporting the process 27

28 Consultation Community [MFMA s.33] Public Notice in local newspaper 12 March 2015 Information Statement was available Comments period closed 13 April 2015 No formal submission received 28

29 The Contract Contract period: 15 years with option to extend with 5 years Starting date: 1 November 2015 Main purposes are to effectively and efficiently operate and maintain the bulk water services with emphasis on driving efficiencies provide appropriate skills and expertise Accountability: OM remains the WSA and WSP, with direct accountability to the community. The contractor will be accountable to OM The Operator has to comply with Regulations 2834 or 17 within 3 years 29

30 The Contract Affordability: a comprehensive O&M management fee is payable as determined through a competitive bidding process The Management Fee includes a Salary Contribution, a Fixed Fee, and a Variable Fee for the treatment plants, pump stations, reservoirs and bulk pipelines The Operator can be appointed i.t.o. the contract as Implementing Agent for capital projects related to the function Performance will be measured and remunerated or penalized with reference to predetermined KPI s, including water quality, training, downtime, blue/green drop, etc. 30

31 The Contract Estimated contract value: R830m (including escalation and contingencies but excluding VAT) over the 15 year contract period Escalation capped at CPI and SALGBC agreements 31

32 Transfer of Staff (Labour Relations Act) 1. In this section Section 197 of the LRA Transfer of contract or employment (a) `business' includes the whole or a part of any business, trade, undertaking or service; and (b) `transfer' means the transfer of a business by one employer (`the old employer') to another employer ('the new employer') as a going concern 32

33 Transfer of Staff and the LRA 197(2) If a transfer of a business takes place, unless otherwise agreed in terms of subsection (6) a) the new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the date of transfer; b) all the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee; 33

34 Transfer of Staff and the LRA All OM staff directly involved with the bulk works transfer to the operator The business associated with the bulk works transfer as a going concern The transfer happens automatically by law No agreement required of employees because no change in terms or conditions Employees existing terms and conditions and length of employment protected by law LRA principle of in the whole no less favourable applies 34

35 Challenges Extensive and complex legislation exhaustive process (> 4 years) MSA s77 June 2011 MSA s78(2) January 2014 SCM process April 2015 MFMA s33 July 2015 Contract start November

36 36 Processes Followed i.t.o. Legal Requirements

37 Challenges Changes in trade union leadership during the process Legal challenge by 2 nd bidder Contract to be monitored and managed diligently Political will is required keep Council informed 37

38 Benefits Regulatory compliance within 3 years (Regulation 2834 or 17) Extensive training and development of staff Transfer of operational risk to the Operator Improved Operational efficiencies SCM processes treatment process optimization Substantial saving compared to the Municipality performing the full function (R9m/year) 38

39 Thank you

40 Millions R 200 Overstrand Municipality Capital Expenditure (Actual) R 180 R 160 R 140 R 120 R 100 R 80 R 60 R 40 R 20 R - 40